Alejandro Dominguez had fired Rayo into the lead after just five minutes, but that was as good it would get for the visitors as two goals in three minutes from Alberto Bueno and Manucho put Valladolid in front.
Oscar then got his first with a lovely chip over Ruben Martinez before Omar Ramos teed up Antonio Rukavina to fire in a fourth before half-time.
The chances continued to flow for the hosts in the second half and, after Oscar had stroked home the fifth on 55 minutes, Manucho capped a wonderful individual display by smashing in his second five minutes from time.
Valladolid had only scored four goals in five games prior to today and got off to the worst possible start when a lovely ball over the top from Adrian freed Dominguez down the left - his powerful low effort proving too good for Jaime.
However, Rayo's lead would not last long as Bueno latched onto Oscar's flick-on to strike a sweet volley into the far corner five minutes later.
Manucho then got his first goal of the season as he exchanged passes with Oscar before rising highest to head home at the back post and he duly turned provider for the third goal, playing Oscar in to lift the ball over an on-rushing Ruben.
Valladolid looked as if they could score every time they went forward - as Rayo boss Paco Jemez continued with his suicidal 3-5-2 formation - and the hosts got their fourth goal of the day eight minutes before the break.
Omar Ramos' cute reverse ball found Rukavina with all the time and space in the world to drill the ball into the roof of the net.
The hosts' domination continued after the interval and Manucho and Oscar combined once again for the fifth goal - the former Manchester United man's accurate pass in behind the Rayo defence stroked home with ease by Oscar.
Some sharp goalkeeping by Ruben then prevented the scoreline from becoming even more embarrassing for the visitors but eventually his goal was breached again as substitute Patrick Ebert squared for Manucho to lash in his second of a highly productive afternoon.